Correlation Between American Premium and Austin Engineering

Can any of the company-specific risk be diversified away by investing in both American Premium and Austin Engineering at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining American Premium and Austin Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Premium Water and Austin Engineering Limited, you can compare the effects of market volatilities on American Premium and Austin Engineering and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in American Premium with a short position of Austin Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Premium and Austin Engineering.

Diversification Opportunities for American Premium and Austin Engineering

0.49

Correlation Coefficient

American Premium  Austin Engineering

Very weak diversification

The 3 months correlation between American and Austin is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding American Premium Water and Austin Engineering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austin Engineering and American Premium is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on American Premium Water are associated (or correlated) with Austin Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austin Engineering has no effect on the direction of American Premium i.e., American Premium and Austin Engineering go up and down completely randomly.

Pair Corralation between American Premium and Austin Engineering

Given the investment horizon of 90 days American Premium Water is expected to generate 26.16 times more return on investment than Austin Engineering. However, American Premium is 26.16 times more volatile than Austin Engineering Limited. It trades about 0.12 of its potential returns per unit of risk. Austin Engineering Limited is currently generating about -0.1 per unit of risk. If you would invest  0.00  in American Premium Water on December 30, 2024 and sell it today you would earn a total of  0.00  from holding American Premium Water or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	86.15%
Values	Daily Returns

American Premium Water  vs.  Austin Engineering Limited

American Premium Water

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Premium Water are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, American Premium demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Austin Engineering

Risk-Adjusted Performance

Very Weak

Over the last 90 days Austin Engineering Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with American Premium and Austin Engineering

The main advantage of trading using opposite American Premium and Austin Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Premium position performs unexpectedly, Austin Engineering can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Austin Engineering will offset losses from the drop in Austin Engineering's long position.

The idea behind American Premium Water and Austin Engineering Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.